The bodies of Lara Lewis and Brian O’Dwyer were pulled from choppy waters by fishermen in the tourist resort of Nazare, around 60 miles north of Lisbon, authorities said.
The girl’s grandmother was rescued off Salgado beach by local seamen and she was taken to hospital.
It is thought that the five-year-old’s parents were sunbathing on the beach when Lara went for a walk with her grandparents, but they strayed outside the area patrolled by lifeguards.
Antonio Jose de Albuquerque, head of Nazare port, told the AFP news agency the Britons had been strolling in an area of Salgado beach that is not monitored by lifeguards.
“When help arrived, they were able to save the grandmother, but the grandfather was already dead,” he said.
“The first-aid workers tried in vain to revive the girl for nearly an hour.”
The area on Portugal’s exposed Atlantic coast is popular with surfers because of its large waves.
Hawaiian surfer Garrett McNamara broke the world record in the area in November 2011 for riding the largest measured wave, at 78ft (23.7m).
The Foreign Office warns holiday-makers on its website to take care on Portugal’s beaches and to obey the warnings of lifeguards.